Advanced Financing to Achieve Sun Shot NREL AOP

Advanced Financing to Achieve Sun. Shot: NREL AOP July 2, 2014 Michael Mendelsohn, NREL is a national laboratory of the U. S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Capital market participation requires… (i) Asset and contractual consistency which allows project cash flows to be pooled into tradable and highly liquid securities, and Availability of due diligence tools necessary to build market confidence in the asset class. Liquidity and Price Transparency Feedback from Rating Agencies and Investors Investor Confidence in Asset Performance Consistency in Cash Flows Tools to Conduct Due Diligence 2

NREL Securitization Activities: Project History NREL Goal Expand availability of capital Lower cost of capital Reduce transaction cost, time to access capital 3 Yr. DOE Award: Advanced Financing to Achieve Sun. Shot Organize the industry around: • Standard documents • Best Practices • Robust datasets Conduct analysis to comprehend opportunities and barriers Promote adoption by developers, financiers, law firms, etc. 3

SAPC: Approx. 300 Participant Entities Developers Legal Investment Advisory (as of June 2014) Manuf. / Other Affordable Solar Akin Gump B of A Merrill Lynch Black & Veatch Enphase Altus Power Bingham Mc. Cutchen Barclays Citi Trust Services Hanwha Q-Cells Amicus Solar Chadbourne & Parke Cal. Cef Cohn. Reznick KACO Borrego Solar Chapman & Cutler Citi Corelogic SMA Clean. Path Cooley Clean Power Finance First Associates Solectria Distributed Sun Coronal Mgt Credit Agricole GL Garrad Hassan Energi Enfinity Covington Credit Suisse Katten Muchin Clean. Path Duke Energy Dechert Deutsche Bank Kroll Bond Ratings Skystream Markets Helio. Power DLA Piper Energy One Finance KPMG LLP PV Evolution Labs Main Street Power Hunton & Williams Foresight Group Lease Dimensions Solar Electric Power Ass. Next. Era K&L Gates Global Capital Finance Locus Energy Global Cool Cities One. Roof Kramer Levin Hannon Armstrong Mercatus Demeter Power Psomas. FMG Milbank Key. Banc Moody’s Ballard Spahr Recurrent Mc. Cauley Lyman k. W Financial Novogradac Standard Solar Rosendin Nixon, Peabody Macquarie Power Factors Amp Solar. City Orrick, Herrington Morgan. Stanley Pw. C Department of Energy SPG Solar Patton Boggs Nord LB Rocky Mtn. Institute Sun. Spec Sungevity Perkins Coie PNC SAIC Birch Tree Capital Sun. Power Sidley Austin Rabobank Sol Systems C 2 ES Sun. Run Skadden Arps Seminole Financial Standard and Poor’s Underwriters Laboratory Vivint Solar Stoel Rives Union Bank Trepp Assurant Wiser Capital Troutman Sanders US Renewables Group TUV Rheinland Mayer Brown 4

SAPC Activities • Standard Contracts – first set available and in use: – – – Residential Lease (aggregated, disaggregated) Commercial PPA (version 2. 0 recently released) Residential PPA near completion • Develop Best Practices – – Installation, O&M, Independent Engineering drafts in process via subcommittees – first public releases due Q 4 2014 • Build Robust Datasets - System performance: o. SPARC Credit performance • Develop Mock Filing to Rating Agencies – – Residential presented to 5 rating agencies – currently before S&P Commercial mock in development • Conduct legal analyses on RA risk concerns • Convert to industry-led group: SEFA 5

Standard Contracts and Best Practices • Benefits of Adoption: o Facilitate cash flows to be pooled into securities to access capital market investment o Improve confidence among investors and regulators o Lower transaction costs o Speed deployment o Improve customer protection o Enable market liquidity of projects 6

Task 3: Data sets o. SPARC: Will be first major public database of system performance First release will be at Inter. Solar! • California Solar Initiative crossed w/ weather data • Many others in development Enphase, SMA, Clean Power Finance, NY & CT Green Banks Will be critical resource for DOE, NREL, PUCs, other labs, non-profits, etc. o. SPARC Plus was launched with GTM in April, 2014 to provide value-added services and build industry adoption * NREL is proposing to offer stipends up to $5 k to cover interface programming costs 7

Task 4: Banking on Solar • Designed to facilitate direct lending for solar deployment o o o Community banks Credit Unions Regional / National Banks • Working group: 100+ members Build consensus on underwriting principles Develop educational materials for lenders & regulators (first piece for CEOs just completed) o Find solutions to complex legal / banking issues o Educate on PACE program benefits & opportunity o Promote to retail banking industry o o 8

Clarifying Legal Issues What is the priority of liens between the mortgage holder and solar lender in the case of a homeowner default? e r Fo ed Mortgage Holder s o cl Solar Lender Banking on Solar is working with leading attorneys to draft template agreements and elucidate processes to ensure high levels of recovery for solar lenders 9

Solar. City Securitizations Nov. , 2013 April, 2014 Improvement? 4. 80% 4. 59% Yes Bond Size $54. 4 mm $70. 2 mm Yes ADSAB (PV of cashflows) $87. 8 mm $106. 2 mm Yes 62% 66% Yes 22 months 12 months Yes Portfolio from Residential 71% 87% Yes Rating BBB+ neutral Tranches Single neutral Yield Advance Rate (% of ADSAB) Wtd. Avg. Seasoning While an exciting development, the Solar. City securitizations only represent $125 million funding relative to total industry annual investment of approximately $14 billion 10

Solar. City Customer Contract Reassignments Reassignment Reason % of Contract Reassignments As % of Total of PV Systems Recovery % Normal Sale 85 1. 75 99 All Other 15 0. 31 92 Total 100 2. 07 98 11

Yield. Co Activity • Announced: NRG Yield, Nextera Yieldco, Abengoa, Sun. Edison (Terra. Form Power) • Under consideration: Sun. Power • SAPC benefit: Standard contracts and best practices will facilitate asset consistency and thus improve liquidity of projects o Make it easier to buy and sell projects to add to yieldco portfolios o 12

SAPC Mock Securitization: Solar. Co Waterfall 1. Trustee and SPE Admin & Extraordinary Expense Reserve Top Off 2. Covered Expenses up to Monthly Cap 3. Master Servicer & Special Servicer Fee rit io Pr 4. O&M Provider Fee f. P yo 5. Transition Manager Fee ts en m ay 6. Class A Interest Mock securitizations will provide valuable legal documents and feedback from rating agencies to industry, improving opportunity for smaller entities to access lowcost debt 7. Class B Interest 8. Reserve Account & Top-off 9. O&M Expense Reserve Acct. & Top-Off 10. Class A Expected Principal* * Only to extent required to meet coverage / spread requirement ** Based on turbo formula 11. Class B Expected Principal* 12 - 15. Add. Covered Expenses, Master Servicer Fees, O&M Provider Fees & Transition Manager Fees in excess of monthly caps, etc. 16. Turbo Principal Payments to Noteholders** 1317. Remainder to Issuer 13

Next Steps for Advanced Financing AOP • Expand pool of potential investors o o o Structured Finance Industry Group (SFIG) Socially responsible investors (Ceres, others) Real estate industry (REITs, etc. ) • Finalize best practices, next suite of standard contracts, o. SPARC data acquisition • Develop mock securitization for commercial portfolio, find structures that can incorporate tax equity • Promote adoption of standard contracts, other assets o o Developers Investors MUSH, non-profit markets Large commercial end-users • Engage banks & regulators on underwriting practices, data to comprehend asset class performance, etc. 14

Thank you… Michael Mendelsohn michael. mendelsohn@nrel. gov 303 -218 -0456 15